Republicans insert healthcare into student loan fight

U.S. President Barack Obama speaks about the rising costs of student loans while at the University of Iowa in Iowa City, April 25, 2012.

Reuters/Larry Downing

WASHINGTON (Reuters) - The Republican-led U.S. House of Representatives defied a veto threat by President Barack Obama on Friday and voted to take money from his healthcare overhaul to extend low-interest rates for federal student loans.

On a mostly party-line vote of 215-195, the House sent the measure to the Senate where Obama's Democrats are certain to reject it. Like Obama, they want to renew the low rate, but favor covering the one-year, $6 billion cost by ending a tax break for the rich.

The matter has emerged as the latest hot issue in advance of the November 6 congressional and presidential elections. Members on both sides are vying for the youth vote and the support of parents struggling help put their children through college.

Democrats and Republicans have until July 1 to find a widely anticipated compromise. That's when the rate is set to double on Stafford loans to 6.8 percent for more than 7 million students.

Thirty Republicans broke ranks and voted against the House bill after the Club for Growth, an influential conservative advocacy group, came out against it.

"The government should not be in the business of subsidizing student loans," the organization said, adding that the vote would be included in its annual "Congressional Scorecard."

Overall, 13 Democrats joined 202 Republicans in voting for the bill, while 165 Democrats and 30 Republicans and voted no.

Obama cranked up pressure on Congress in recent weeks with visits to college campuses where he portrayed Republicans as unsympathetic to their plight.

House Speaker John Boehner fired back this week by accusing Obama of playing politics and manufacturing a fight. Boehner insisted that his party would find a solution.

Shortly before the House vote, Boehner said: "Nobody wants to see student loan interest rates go up - especially when you got recent college graduates (with) 50 percent unemployed or under-employed because of the president's economic policies."

"TOO HOT TO HANDLE"

Despite claims to the contrary, Democrats said Republicans had little if any interest in the problem until Obama hammered them on it.

"The Republicans have folded, because the president made the issue too hot to handle," said House Democratic Leader Nancy Pelosi.

Democrats denounced the Republicans' proposal to extend the student loan interest rate because it targets Obama's 2010 healthcare law, which Republicans have sought to repeal.

Their measure would eliminate the Prevention and Public Health Fund, which Republicans labeled a "slush fund."

Republicans noted that $4 billion had been taken out of it just months ago to finance an extension of a payroll tax and jobless benefits.

"It's a common-sense plan that deserves bipartisan support," said Republican Representative Judy Biggert, a chief sponsor of the measure.

Democrats complained it would eliminate the remaining $12 billion in the fund, which they say is critical to preventative healthcare, particularly for women and children.

"This bill goes in the wrong direction," said House Democratic Whip Steny Hoyer.

The White House, in its veto threat, called the bill "a politically motivated proposal and not the serious response to a problem that America's college students deserve."

The Senate is set to vote on May 8 on a bill to fund extending the loan rate by plugging a loophole that Democrats say wealthy professionals use to avoid payroll taxes.

Though Democrats control the Senate, Republicans are expected to block the measure, raising pressure to compromise.

Republican Representative Mike Simpson said the matter would ultimately go to a House-Senate conference. "There's plenty of time, a couple of months, to resolve this problem," he said.

Representative Xavier Becerra, a member of Democratic leadership, said, "This is an all-hands on deck moment. Everyone should be asked to put something on the table."